Sam Zell Sounds Off on Trump, Next Recession

EDITOR’S NOTE: Sam Zell, the outspoken chairman of private investment firm Equity International whose interview appeared in last week’s issue of Barron’s magazine, is a key investor in and chairman of Equity LifeStyle Properties (ELS), a Chicago-based real estate investment trust that owns and operates Encore RV parks and the Thousand Trails network of more than 180 RV resorts and campgrounds nationwide. Zell, in his interview, addresses the Trump administration, the next economic downturn, high-quality cannabis and a few of other topics.

Sam Zell’s new book, Am I Being Too Subtle?, is a story of how the real estate mogul started out by running student apartments in the 1960s, created a corporate empire, and then sold Equity Office Properties Trust to Blackstone Group in 2007, just before the real estate market collapsed.

Known as one of the great U.S. investors, Zell also created a number of major publicly traded companies, including Equity Residential, Equity LifeStyle Properties, Equity Commonwealth, Covanta Holding, and Anixter International.

Not all that he touched turned to gold: In 2007, he took private the Tribune Co. , now Tronc (TRNC), owner of the Chicago Tribune and the Los Angeles Times, in a leveraged buyout. Tribune then filed for bankruptcy, and Zell exited the reorganized company in 2011.

Recently, the 75-year-old Zell, wearing a black T-shirt, jeans, and a gold bracelet, talked with Barron’s about real estate and stocks, and about the real estate guy in the White House. Because the book is a love song to his refugee parents and to immigration, we asked him about that, too. Here’s what he said.

Barron’s: You real estate guys are telling us what to do—Donald Trump in the White House, you with your book. What grade would you give this president?

Zell: An incomplete. He’s learning on the job. They all do, but most of them came from a political environment. In politics, you are very sensitive about hiring and firing. In the business world, and particularly for him, firing people was a daily occurrence. His ability to say, “Let’s take a risk on this guy, and if we don’t like him, we’ll get rid of him” is a very different mind-set. He should stop tweeting. Never pick a fight with somebody who buys ink by the barrel. Not that I’m a great fan of the press, but I can’t imagine there’s a long-term positive in taking on the people whose job it is to cover you. The strength of our society is predicated on respect for his office. That’s missing right now.

Barron’s: Yet you’ve been optimistic about his administration’s ability to stoke growth.

Zell: In his first year, President Barack Obama spent a trillion dollars on a stimulus bill, which achieved nothing other than almost a trillion dollars of debt that is now worth more than that. Trump has a unique opportunity to create stimulus by deregulation. He has already rolled back the rule about navigable waters [which extended the reach of federal water regulations]. One change that would help small businesses is to modify Dodd-Frank, reduce the unrealistic compliance costs for small banks, so that lending is more readily available. Another is to roll back excessive environmental legislation. I worry about too much capacity. If you double the size of the Environmental Protection Agency, you then have a whole bunch of people thinking up new regulations to keep busy.

Barron’s: Last year, you predicted a recession for 2017. Then you walked back that prediction.

Zell: Another Democratic administration would have led to a recession. Trump’s election gave us extra innings because there’s more optimism in the business sector. Smaller businesses were basically destroyed by the Obama administration. Compliance was a giant animal that gobbled up everything. However, this recovery began in 2009. There aren’t many examples of 10-year recoveries in U.S. history.